What is Fiscal Year?

Businesses report results for an annual accounting period called the tax year. A calendar year runs January 1 to December 31. A fiscal year is any other 12-month period ending on the last day of a month, such as July 1 to June 30. A 52-53 week year is another variation. The IRS explains tax years in Publication 538.

Who can use a fiscal year

• C corporations can generally choose a fiscal year
• Sole proprietors generally use the calendar year, because they report on their individual return
• Partnerships, S corporations and personal service corporations generally must use a required tax year, often the calendar year, unless they establish a business purpose or make a section 444 election with associated requirements

Why choose one

Seasonal businesses sometimes prefer a fiscal year that ends after their busy season, so year-end inventory is low and results reflect a complete season. For example, a retailer might end its year on January 31, after the holidays.

Effect on deadlines

Return due dates follow the fiscal year: for example, a C corporation's return is generally due on the 15th day of the fourth month after year end. Estimated tax installments and other deadlines also shift. See our business tax deadlines calendar, which assumes calendar years.

Changing the tax year

Changing a tax year generally requires IRS approval, often through Form 1128, unless an automatic procedure applies.

Books vs taxes

A business can use a different fiscal year for internal reporting than for taxes, though most small businesses keep them the same to avoid confusion. Our accounting services support either.

Browse more definitions in the small business glossary.